Economics is a social science that focuses on the production, distribution, and consumption of goods and services. The study of economics is primarily concerned with analyzing the choices that individuals, businesses, governments, and nations make to allocate limited resources. finance has ramifications on a wide range of other fields, including politics, psychology, business, and law.
Key Takeaways
- Economics is the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively.
- The field of economics is connected with and has ramifications on many others, such as politics, government, law, and business.
- The two branches of economics are microeconomics and macroeconomics.
- Economics focuses on efficiency in production and exchange.
- Gross Domestic Product (GDP) and the Consumer Price Index (CPI) are two of the most widely used economic indicators.
- Economics is the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively.
- The field of economics is connected with and has ramifications on many others, such as politics, government, law, and business.
- The two branches of economics are microeconomics and macroeconomics.
- Economics focuses on efficiency in production and exchange.
- Gross Domestic Product (GDP) and the Consumer Price Index (CPI) are two of the most widely used economic indicators.
Microeconomics
Microeconomics studies how individual consumers and firms make decisions to allocate resources. Whether a single person, a household, or a business, economists may analyze how these entities respond to changes in price and why they demand what they do at particular price levels.
Understanding Economics
Assuming humans have unlimited wants within a world of limited means, economists analyze how resources are allocated for production, distribution, and consumption.
The study of microeconomics focuses on the choices of individuals and businesses, and macroeconomics concentrates on the behavior of the economy on an aggregate level.
One of the earliest recorded economists was the 8th-century B.C. Greek farmer and poet Hesiod who wrote that labor, materials, and time needed to be allocated efficiently to overcome scarcity. The publication of Adam Smith's 1776 book An Inquiry Into the Nature and Causes of the Wealth of Nations sparked the beginning of the current Western contemporary economic theories.
Macroeconomics
Macroeconomics is the branch of economics that studies the behavior and performance of an economy as a whole. Its primary focus is recurrent economic cycle and broad economic growth and development.
It focuses on foreign trade, government fiscal and monetary policy, unemployment rates, the level of inflation, interest rates, the growth of total production output, and business cycle that result in expansions, booms, recessions, and depressions.
Using aggregate indicators, economists use macroeconomic models to help formulate economic policies and strategies.
What Is the Role of an Economist?
An economist studies the relationship between a society's resources and its production or output, and their opinions help shape economic policies related to interest rates, tax laws, employment programs, international trade agreements, and corporate strategies.
Economists analyze economic indicators such as gross domestic product and the consumer price index to identify potential trends or make economic forecasts.
According to the Bureau of Labor Statistics (BLS), 38% of all economists in the United States work for a federal or state agency. Economists are also employed as consultants, professors, by corporations, or as part of economic think tanks.2
What Are Economic Indicators?
Economic indicators detail a country's economic performance. Published periodically by governmental agencies or private organizations, economic indicators often have a considerable effect on stocks, employment, and international markets. They may predict future economic conditions that will move markets and guide investment decisions.
Gross domestic product (GDP)
The gross domestic product (GDP) is considered the broadest measure of a country's economic performance. It calculates the total market value of all finished goods and services produced in a country in a given year. In the U.S., the Bureau of Economic Analysis (BEA) also issues a regular report during the latter part of each month.3 Many investors, analysts, and traders focus on the advance GDP report and the preliminary report, both issued before the final GDP figures because the GDP is considered a lagging indicator, meaning it can confirm a trend but can't predict a trend.
